Equities: This Time Is Not Different

This should silence those who have doubted the current equity rally under the pretext that this time is different. Equities seem to rally despite the prospect of weak growth in the near-term. And that is the way it should be - equities are a claim to extremely long duration cashflows.




Source: Reinart and Rogoff;"Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison"

Going for Gold

It has been really busy. The call on Russian equities is working really well. Meanwhile, I have invested in gold miners. No, I am no gold bug. I am not a believer in hyper-inflation either. Yet, I think gold will prove to be a good investment over the next few years.

My reason is simple. The economic outlook that we face is fat-tailed. The private sector sector delevering underway is creating deflationary headwinds. The authorities are countering that by spending and keeping interest rates low for long; leading to long-term inflationary concerns.

The fat tailed economic outlook creates a skew in the expected inflation distribution. Democratic governments will go for inflation if pushed to the corner. And, that's all you need for gold to go up.